Hello Professionals,

I have a client who is a full year VA resident and received a 1065 K-1. Federal K-1 is at loss, MD K-1 had a big addition, so that MD state is showing taxable income. In other words, a full year VA resident had MD income which all came from a MD K-1 addition item.

To my understanding, because VA resident return started from Fed AGI and then adjust for VA items, so the MD income in this case is NOT taxed by VA? In ProConnect, the VA tax return is still showing a tax credit for MD taxes paid, does it make sense? If VA is not taxing on this portion of income, should the MD tax credit be manually removed? 

Thank you!